European Open: BOE and SNB could be live meetings today
Matt Simpson March 23, 2023 5:55 AM
With the FOMC meeting in the rear view mirror, the focus now shifts to Europe where the UK and SNB announce their interest rate decisions.
- Australia's ASX 200 index fell by -47 points (-0.67%) and currently trades at 6,968.60
- Japan's Nikkei 225 index has risen by 520.94 points (1.93%) and currently trades at 27,466.61
- Hong Kong's Hang Seng index has risen by 251.15 points (1.28%) and currently trades at 19,842.58
- China's A50 Index has risen by 53.7 points (0.41%) and currently trades at 13,130.10
UK and Europe:
- UK's FTSE 100 futures are currently down -23 points (-0.3%), the cash market is currently estimated to open at 7,543.84
- Euro STOXX 50 futures are currently down -21 points (-0.51%), the cash market is currently estimated to open at 4,174.70
- Germany's DAX futures are currently down -50 points (-0.32%), the cash market is currently estimated to open at 15,166.19
- DJI futures are currently up 136 points (0.42%)
- S&P 500 futures are currently up 18 points (0.45%)
- Nasdaq 100 futures are currently up 58.25 points (0.46%)
- The US dollar remained the weakest major overnight, following the Fed’s dovish 25bp hike
- Fed fund futures imply a 64.8% chance of a pause at their May meeting, for 5% to be the terminal rate and are close to pricing in a 25bp cut in July
- Whilst the Fed slightly upgraded inflation forecasts for 2023 and 2024, and several members still see rates going higher according to the dot plot, Janet Yellen’s comments on not providing ‘blanket insurance’ for US deposits has also knocked sentiment
- Wall Street was dragged lower yesterday by banking stocks thanks to the combination of Yellen’s comments and Powell’s denial that the Fed intend to cut rates this year
- Asian equities were mixed with the ASX leading Japan’s share markets lower, yet China’s market posted gains thanks to a weaker US dollar
- NZD and AUD are the strongest majors, USD and CHF were the weakest
- European futures point to a weak open as they try to close the gap with US equity markets
FTSE 100 daily chart:
The FTSE has rallied for three days, yet it has stalled at a resistance cluster which includes the August and December highs and the monthly S2 pivot point. Bears could either use a break beneath yesterday’s low or the 7500 handle to assume bearish continuation, with the 7400 / S3 zone making a viable initial target for bears to consider.
The SNB could hike rates by 50bp at 08:30 GMT:
Until recently, the consensus was for the SNB to hold rates at a relatively low level of 1%. Their rates were at -0.75% until their first 50bp hike in June, which was followed by a 75bp hike in September and then another 50bp in December. So even if they hike by 50bp today, the 1.5% level remains very low by global standards unless we compare it to the BOJ.
So it may be the press conference 09:00 which requires the greater attention to see if there are more hikes to come. And given that inflation was 0.7% m/m higher, the ECB and Fed have hiked and comments from President Jordan have been hawkish overall, I suspect it will be a 50bp hike despite the SNB having to get involved with the Credit Suisse saga.
BOE interest rate decision is at 2:00 GMT
Governor Bailey warned that incoming data ahead of today’s meeting could decide whether the BOE hikes or pauses, and with GDP, wages and inflation all pointing higher it is hard to see why they will not hike by 25bp today. And the case becomes stronger now the Fed have hiked by 25bp and the ECB by 50 despite recent turbulence.
So we really want to find out whether there is any discussion of a pause and / or we see less of an appetite for hikes at this meeting via the MPC votes.
Economic events up next (Times in GMT)
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.